Shri Shibu Soren Vs. ACIT and others (ITAT Delhi)- If there is any undisclosed income and there is a search, addition of such undisclosed income is to be made in block.It is observed by the Honourable Jurisdictional High Court in this case that where the department is aware of the existence of an asset, then the department may be fully justified in issuing notice u/s 148 if the department feels that there is any undisclosed income.

This shows that for undisclosed income, addition can be made in reassessment proceedings also if the department is aware about the assets and department does not agree with the explanation of the assessee that receipt out of which the asset has come into existence is not taxable. In the present case also, the department is fully aware with precise and minute details about these bank accounts and money lying therein and the assessee also accepted about these bank accounts in the Statements u/s 131 and also explained that these are party funds. If the department is not satisfied with such explanation of the assessee, it could have been questioned in regular assessments by issuing notice u/s 148 but these bank accounts in the facts and circumstances of the present case cannot be subject matter of consideration and addition in block assessment proceedings. We, therefore, delete the addition on account of these bank accounts also by holding that the same cannot be considered or added in block assessment. In the light of this decision as per which we have held that no addition is justified in the present case, either in respect of deposits in various bank accounts with PNB Noroji Nagar, New Delhi or various other additions made by the A.O., which are not relatable to any evidence found in course of search, we are of the considered opinion that no adjudication is called for regarding various other contentions raised by the Ld. A.R. regarding non existence of search, or non validity of search for the reason that there is no panchnama or that there is no notice issued by the A.O. u/s 143(2) after filing of block return etc. We do not decide these aspects because now these aspects are of academic interest only once it is held by us that no addition made by the A.O. in the present cases is sustainable. We, therefore, do not decide these aspects.

Out of this bunch of 5 appeals, all the appeals are filed by the assessees. The four appeals are filed by four individuals against respective block assessment order passed by the A.O. on 29.04. 1997 in the case of Sri Sibu Soren, Sri Suraj Mondal, Sri Simon Marandi & Sri Shailendra Mahto. The remaining one appeal is filed in the ease of Jharkhand Mukti Morcha, a political party. This appeal is directed against the assessment order passed by the A.O. on 18.11.1997 u/s 158BC read with Section 158BD and Section 144 of the Income tax Act, 1961. These appeals are first appeals before the Tribunal because during that period of time, block assessment order was required to be passed with the approval of CIT and hence, the 1st appeal was required to be filed before the Tribunal. It was agreed by all the sides that the facts in all these cases are similar and interconnected and the arguments are also more or less similar and hence, all these appeals were heard together and are being disposed of by this common order for the sake of convenience.

2. It was also agreed by all the sides that the facts discussed in the case of Sibu Soren may be considered and on this basis, all the four appeals of 4 individuals can be decided of course after considering the arguments of different advocates appearing on behalf of the respective assesses whereas from the side of the department, Ms. Rashmi Chopra, Standing Counsel, Advocate is arguing for the Department in all these five cases. We, therefore, note down the facts from the case of Shri Sibu Soren, which are as under:

3. It is noted by the A.O. in the assessment order that a search warrant u/s 132(1) of the Income tax Act, 1961 was issued and executed on 26.04.1996 at the Punjab National Bank, Noroji Nagar, New Delhi (hereinafter referred to as ‘PNB’), in respect of FDR 195/Spl/FDR 2000 and FDR 194 and also S/B A/c 18914 and 19100 held by the assessee individually and jointly. It is further noted by the A.O. that the amount of all these bank accounts were placed under prohibitory order u/s 132(3) of the Income tax Act, 1961. The A.O. also further noted that the jurisdiction of this case was transferred to ACIT, Central Circle 7, New Delhi w.e.f. 04.12.1996 vide the order of CIT Ranchi passed by him u/s 127 on 02.12.1996. The A.O. noted that notice u/s 158BC of the Income tax Act, 1961 dated 07.01.1997 was issued and served on the assessee asking him to file within 16 days return of income in Form 2B for the block period from 01.04.1986 till 26.04.1996 as the search was initiated on this date at his bank accounts. In reply, a letter was submitted before the A.O. on 24.01. 1997submitting that the entire documents have been seized by CBI during search on 07.09.1996 and 08/09/1996 and it was stated that since the assessee is yet to obtain copies of the documents from CBI, he is not in a position to furnish the details as requested. The A.O. again noted that a detailed questionnaire along with notice u/s 142(1) and 143(2) were issued on 11.02.1997 and served on the assessee asking him to furnish information on various points mentioned in the notice. It is also noted by the A.O. that the notice covering details of facts along with copies of the statements of various witnesses recorded by IT Department in Bihar in course of investigation carried out by the IT Department as regards to alleged claim of the assessee that the amount deposited in PNB in his name belongs to Jharkhand Mukti Morcha party (hereinafter referred to as ‘JMM’), who raised it through donations (this was stated by the asses see on statement recorded u/s 131 on 14.03.1996 before ADI Unit 1, New Delhi). The A.O. has also noted that the notice also covers the details of various assets for which information was in possession of the Department that these belong to the assessee and the assessee was asked to file the source of acquisition of these assets. The assessee was also asked to file details with source of any other assets owned by the assessee but not included in the above list. The assessee was also asked to give details of his income and house hold withdrawals during the block period.

Thereafter, several adjournments were taken by the assessee. It is also noted by the A.O. that the Ld. A.R. of the assessee Mr. Rajendra Gupta, CA obtained photocopy of JMM bank account and assessee’s bank accounts on 05.03.1997. It is also noted by the A.O. that a letter dated 03.03.1997 asking the assessee to contact ADI Unit 1, New Delhi for inspection of the search documents, was served on the Ld. A.R. of the assessee on 05.03.1997. The matter was adjourned to 14.03.1997. On that date, i.e. on 14.03.1997, the assessee did not file any details and asked for adjournment. Final adjournment was granted by the A.O. and the hearing was fixed for 26.03.1997. It is noted by the A.O. that a letter was issued to the assessee on 14.03.1997 and it was served on the assessee on 15.03.1997 in which assessee was informed that opportunity for the cross examination of witnesses and the statements recorded in Bihar is being provided at the office of ADI, Ranchi Shri A K Pandey on 19.03.1997 at 11.00 AM and he may use this opportunity for cross examination o the witnesses. Thereafter, on 17.03.1997 Ld. A.R., Shri R. Gupta appeared and filed a letter dated 17.03.1997 in which he submitted that it would not be possible for his client to go to Ranchi for the purpose of cross examination of witnesses and requested that cross examination may be provided at New Delhi. The A.O. noted that the request of the assessee was rejected on the same date and he was asked to take the opportunity provided to him at Ranchi but the assessee did not take the opportunity of cross examination provided to him at Ranchi. Thereafter, it is noted by the A.O. that on 20.03.1997, the block return in Form 2B was filed by the assessee along with details of income of various years. Thereafter, on 26.03.1997, Ld. A.R. Shri R. Gupta appeared once again and requested for adjournment. The A.O. asked the Ld. A.R. to file on 02.04.1997 the sources of all the assets and deposits in the bank failing which he was asked to show cause why the same should not be added as his unexplained investment. It is further noted by the A.O. that Ld. A.R. was also explained that the return filed does not completely explain the source and acquisition of various deposits and capital account papers do not give breakup of capital figures. Thereafter on 02.04.1997, Shri R. Gupta, CA withdrew his power of attorney w.e.f. that date and no other person appeared to attend the hearing fixed. On 03.04.1997, a show cause notice u/s 144 was served on the assessee, which was sent through speed post at Delhi address given in the block return and the date of reply was fixed for 10.04.1997. The A.O. also noted that in this notice, assessee was pointed out various discrepancies, incomplete information submitted with the return of income and was asked to show cause why the assessment should not be completed on the basis of the material available on record as reply to all the points covered in the questionnaire dated 11.02.1997 have not been furnished. Thereafter, on 10.04.1997, one Shri Uma Shankar, not in the capacity of Ld. A.R. of the assessee appeared and carried a letter of the assessee requesting for adjournment. The next date of hearing was fixed for 15.04.1997. On 15.04.1997, Shri J. Jaipuriar, CA appeared and filed power of attorney but did not file any reply. On his request, the case was adjourned to 17.04.1997. Some other information was also called for as per order sheet entry dated 15.04.1997. On 17.04.1997 Shri J. Jaipuriar CA appeared and filed some details. He was asked by the A.O. to file reply to the remaining queries and furnish the documents in support of the submissions and the case was adjourned to 21.04.1997 and it was pointed out to him that this is the last opportunity for the assessee to file evidence and explanation. The A.O. also noted that the assessee was also served with copy of statement of Shri Shailendra Mahto recorded by Metropolitan Magistrate, Shri Rakesh Dadani on 22.03.1997 and was asked to explain why in view of the statement, the amount deposited in PNB should not be held as amount belonging to person in whose account it was deposited. Copy of the order u/s 132(3) signed and served by ADI, Unit 1, New Delhi on 26.04. 1996 was also given. On 21.04. 1997, the assessee field a letter dated 21.04.1997 but no information was filed and the case was again adjourned for 22.04.1997. On this date also, the assessee did not file the remaining information in support of his investment and other points and only a letter was filed on this date. Thereafter, the A.O. completed the assessment on 29.04.1997.

In the assessment order, the A.O. also discussed the natural justice aspect and stated that it was fully complied with and various opportunities were provided to the assessee. Regarding the cross examination also, it is noted b y the A.O. in the assessment order that the assessee was provided opportunity for cross examination although the same was not availed by the assessee. Thereafter, in Para 18 of the assessment order, the A.O. has reproduced details of various deposits in various bank accounts of the assessee and other persons which are as under:

A/c No.

Name of holder

Amount Rs.

Date

194

Shibu Soren, Rupi, Hemant

30,00,000

1.8.93

And Basant

19100

-do-

2,000 & tfr from a/c No.194

1.2.95

197

Simon Marandi &

12,00,000

1.8.93

Sushila Hansda

21,00,000 &

2.8.93

19037

-do-

Tfr from a/c

No.197

196

Shailendra Mahto &

39,00,000

1.8.93

Abha Mahto

18983

-do-

tfr from a/c

No.196

17108

Suraj Mandal

30,00,000

1.8.93

195/Spl

Suraj, Shibu, Simon &

30,00,000

1.8.93

Shailendra

18914

-do-

10,000 &

1.8.93

Tfr from a/c 195

3. Regarding deposits in various bank accounts at PNB, it is noted by the A.O. that it was the claim of the assessee before him that the amount deposited in his bank account belong to JMM party and the party also submitted that its money was deposited in the bank so that it could be used for the party’s activities in New Delhi but this contention of the assessee and the JMM was not accepted by the A.O. and he has referred to the statement given by Shri Shailendra Mahto during the course of trial proceedings under the provisions of Prevention of Corruption Act in the court of Special Judge Honourable Shri Ajit Bharihoke and u/s 164 Cr.p.c. on 22.03.1997 before the Metropolitan Magistrate Shri Harish Dudani. The A.O. also noted that in the statement, he has admitted that the amount deposited in the PNB in his name represents the amount of Rs.50 lacs received by him for voting against No Confidence Motion against the then Central Government, which was physically handed over to him by Shri Simon Marandi. The A.O. also noted that he has stated that other three persons namely Shri Suraj Mandal, Simon Marandi and Shailendra Mahto also received almost the similar amounts which were deposited in PNB in their respective bank accounts. The A.O. heavily relied on the statement of Sri Shailendra Mahto in rejecting the claim of the assessee that the amount deposited in these bank accounts belongs to JMM. The A.O. also further noted that the resolution for authorizing all these four MPs to deposit the cash in their personal name is said to be passed on 11.07.1993 but the same is written on a plain paper and the attestation of this document is only done on 29.03.1996. The A.O. has also noted that the use of money for personal need of the account holder is sought to be explained by the plea of personal loan. The A.O. has further noted that the provision of personal loan to the members @ interest of 2% p.a. was added after the closing of the meeting and moreover, no interest was paid by these MPs on these loans. Various other discrepancies are noted by the A.O. in the assessment order with regard to entry in the books of account of JMM of these loans said to be granted to various MPs. It is also noted by the A.O. that the return of income of JMM for the assessment year 1994-95 was filed on 31.03.1996 after recording of statement by IT Department but in these returns also, the FDR No. 195 for Rs.30 lacs in the joint name of these four persons was not included and this FDR was sought to be included by filing revised return. The A.O. also noted that the revised return is said to have been filed by JMM on 23.4.1996 which is beyond the date of 31.03.1996 up to which revised return could have been filed. The A.O. also noted that as per the statement of Shri Sushil Kumar, it was stated by him that he has introduced all the above accounts at PNB and he also stated that money was brought in 5-6 suitcases, out of which some bundles of currency notes carried slip of Canara Bank, Bangalore. The A.O. also observed that this shows that the amount cannot be the amount raised as donation at Bihar since the donation claimed to have been received by the party in small denomination below Rs. 10,000/- per person. The A.O. also further noted that it is claimed that donation coupons were used for raising donations for JMM in the financial year 1993-94 and these deposits coupons were of the denomination of Rs. 100/, 500/-, 1,000/-, 2,000/- and 5,000/-. It is further noted that these are plain donation coupons in which the names of the donors are not mentioned. It is further noted by the A.O. that Shri S Bhattacharya has stated on 11.07.1996 (copy given to the assessee) that these donation coupons were printed by RR Paper stores Chas Road, Bokaro in the year 1992 & 1993. The A.O. further noted that he also stated that in the year 1995, donation coupons of JMM were printed by M/s Sheth Art Printers, Bye Pass Road, Chas. The A.O. has further noted that subsequently, survey u/s 133A of the Income tax Act, 1961 was conducted in the business premises of M/s. RR Paper Stores and Sheth Art Printers on 12.07.1996. The A.O. has noted that these facts emerged in the course of survey that M/s. RR Paper Stores was closed sometime in Sep 1991 and hence, they could not have printed the donation coupons of JMM as has been submitted by the assessee. Regarding M/s. Seth Art Printers, it is noted by the A.O. that there are two types of coupons. In type one of coupons, the year 1991 is printed but these coupons are only of Rs.2 lacs and would have been used in year 1991 & 1992. The other type of coupons i.e. type 2 are the coupons printed in the year 1995 of Rs. 100.50 lacs which bear the marking of SAP which denoted Seth Art Printers. The A.O. also noted that as per M/s. Seth Art Printers, these coupons were printed in January 1995 and hence, the same could not have been used for raising donation in the relevant period. Some other aspects were also discussed by the A.O. in the assessment order and finally, it is held by him that this claim of the assessee is not acceptable that the amounts deposited in his bank accounts were belonging to JMM and he held that these are the amounts of respective account holders. Out of the account No. 195/Spl/FDR 2000 which is standing in the joint name of Suraj Mandal, Shibu Soren, Simon Marandi and Shailendra Mahto in which an amount of Rs.30 lacs was deposited on 01.08.1993, the A.O. distributed the amount in the hands of these four persons and made addition of Rs.7.50 lacs in each case. Regarding the other bank account No.194, which is in the name of Shri Shibu Soren, Rupi, Hemant & Basant in which Rs.30 lacs was deposited on 01.08.1993, the entire amount was added in the hands of Shri Shibu Soren. An amount of Rs.2,000/- was deposited on 01.02.1995, in the joint account in the name of these four persons; Shibu Soren, Rupi, Hemant & Basant account number being 19100. This amount of Rs.2,000/- was also added in the hands of Shri Shibu Soren. Some amount was transferred from FDR 194 to account no.19100 and no addition was made on account of such transfer from one account to the other. For deposit of Rs. 10,000/- on 01.08.1993 in Saving Account No. 18914 standing in joint names of these four persons, the A. O. made addition of Rs. 2,500/- in the hands of each of these four persons. In addition to this, various other additions were also made by the A.O. in the block assessment of Shri Shibu Soren with regard to various investments and various income such as salary as MP, interest etc. Total addition made by the A.O. in the case of Shibu Soren is Rs. 1,16,38,824/-. Out of this total addition of Rs. 116.38 lacs, the addition on account of various deposits in the bank account which was subjected to search proceedings and interest income thereon is as under:

Financial year

Deposit in the bank account (Rs.)

Interest (Rs.)

1993-94

37,52,500

1,83,395

1994-95

2,000

2.06,765

1995-96

—

1,33,675

April 1996

—

—

4. Similarly, in the case of Simon Marandi, an amount of Rs. 12 lacs was deposited on 01.08.1993 in the joint account No. 197 sanding in the name of Simon Marandi & Sushila Hansda. In the same bank account No.197, an amount of Rs.21 lacs was deposited on 02.08.1993. The total addition on account of these deposits in the bank account No 197 is of Rs.33 lacs and 1/4th of the deposit in the joint FD 195 i.e. Rs.7.50 being 1/4th of Rs.30 lacs, was also added in the hands of Shri Simon Marandi. In addition to this, various other additions were made in the hands of Shri Simon Marandi on account of interest income, on account of various investments and also on account of salary as MP. The total additions made in his hands are Rs.53,53,620/- including addition on account of deposits in PNB and the interest income as under:

Financial year

Deposits (Rs.)

Interest (Rs.)

1993-94

40,52,500

1,10,793

1994-95

—

1,66,207

1995-96

—

1,38,229

April 1996

—

—

5. Similarly, in the case of Shri Shailendra Mahto, addition was made on account of deposits in the bank account No. 196 standing in the name of Shri Shailendra Mahto and Abha Mahto being the amount deposited of Rs.39.80 lacs on 01.08.1993. There was no cash deposit in the S/b account No.18983 standing in the joint name of Shri Shailendra Mahto and Abha Mahto except transfer from account No.196 and hence no addition was made on account of deposits in this bank account. Addition on account of interest income was also made. The total addition made in the hands of Shri Shailendra Mahto is of Rs.84,12,349/- which includes addition on account of deposits in the bank account with PNB and interest income as under:

Financial year

Deposits (Rs.)

Interest (Rs.)

1993-94

50,00,000

41,323

1994-95

—

2,39,581

1995-96

—

87,944

April 1996

—

—

6. Although, the amount despotized in the bank account No.196 in the name of Shri Shailendra Mahto and Abha Mahto was only Rs.39.80 lacs but addition was made to the extent of Rs.50 lacs as has been admitted by him in his statement that the amount received by him on account of voting against No Confidence Motion was Rs. 50 Lacs.

7. Similarly, in the case of Shri Suraj Mandal, total addition made by the A.O. is of Rs. 1,86,34,834/- which includes addition made on account of deposits in PNB and interest income thereon as under:

Financial year

Deposits (Rs.)

Interest (Rs.)

1993-94

37,52,500

4,28,323

1994-95

—

5,37,642

1995-96

—

11,12,502

April 1996

—

—

8. In the remaining case of the party i.e. JMM, the assessment was completed by the A.O. u/s 158BC read with Section 158BD, the total addition made was as under:

Financial year

Deposits (Rs.)

Interest (Rs.)

Total (Rs.)

1987-88

Nil

nil

nil

1991-92

Nil

nil

nil

1992-93

10,27,348

16,124

10,46,472

1993-94

38,15,332

74,918

38,90,250

1994-95

1,33,60,000

5,29,016

1,38,89,016

1995-96

23,95,000

10,38,853

34,33,853

1996-97

Nil

10,60,,569

10,60,569

1997-98

Nil

32,000

32,000

Upto 27.9.97

2,36, 19,160

9. The A.O. further noted that out of this total addition to be made in the block of Rs. 2,36,19,160/-, the amount of Rs. 1,29,98,449/- has already been assessed on protective basis in the regular assessment proceedings of the assessee for the assessment year 1994-95 and hence, only balance amount of Rs. 1,06,20,711/- has been added in the block assessment order on protective basis.

10. Now, all these five assessees are in appeal before us.

11. It was agreed by all the sides that the case of Shri Shibu Soren will be argued first and the arguments raised in this case will be applicable in the remaining there cases of individual also and hence all these four cases of individuals can be decided on the basis of arguments in the case of Shri Shibu Soren. It was agreed that in the remaining three cases, respective counsels will make their submissions only with regard to any additional arguments required in the facts of that case.

12. This is the 1st argument on behalf of the assessee that there is no search on the assessee in the present case. It was submitted that the alleged warrant of authorization u/s 132(1) was issued in the name of PNB Noroji Nagar, New Delhi where the assessee has bank account and FDRs and no warrant of authorization u/s 132(1) was issued to search the assessee. The 2nd argument is that though the search had been conducted on the PNB on 26.04.1996 but the same was not concluded as no panchnama has been drawn and served upon the assessee till date. It is submitted that in case a search is initiated, the same has to be concluded by preparing a panchnama but in the present case, only prohibitory order u/s 132(3) of the Income tax Act, 1961 were passed on 26.04.1996 and a copy of one such prohibitory orders were provided to the assessee that too on 17.04.1997 i.e. after a period of almost one year. It is further submitted that none of the residential premises or office premises of the assessee was ever searched u/s 132(1) of the Income tax Act, 1961 and no incriminating documents or material has been brought on record so as to enable the department to assume jurisdiction u/s 158BC of the Income tax Act, 1961. It is also submitted that search of bank of the assessee is not a search on the assessee. Arguments were raised regarding validity of search also by contending that there was no reason for the department to search the assessee but we are not dealing with these arguments because the Tribunal cannot go into the question of validity of search. Further contention was raised that the opportunity was not provided to the assessee and hence, the principles of natural justice was violated. It is also submitted that the opportunity of cross examination was not provided to the assessee and the opportunity for cross examination said to have been provided to the assessee was not a real opportunity and hence, on this account also, principles of natural justice has been violated. One more contention was raised that although prior to the filing of return, notice u/s 142(1)/143(2) were issued on 11.02.1997 but no notice u/s 143(2) was issued after the filing of return of income and hence, for this reason also, the assessment order framed by the A.O. is bad in law as per the judgment of Hon’ble Apex Court rendered in the case of Hotel Blue Moon as reported in 321 ITR 362 (S.C.). Regarding non providing of opportunity and cross examination, reliance was placed on the following judgments:

(a) CIT Vs Ashwani Gupta 322 ITR 396 (Del.)

(b) Kishanchand Chelaram 125 ITR 713 (S.C.)

(c) CIT Vs S M Aggarwal 293 ITR 43

(d) CIT Vs S MC Share brokers Ltd. 288 ITR 345 (Del.)

(e) CIT Vs Dharampal Prem Chand Ltd. 295 ITR 105 (Del.)

(f) CIT Vs Pradeep Kumar Gupta 207 CTR 115

13. In addition to various above arguments on technical aspect, regarding merits of various addition made by the A.O., it was submitted that under the provisions of Chapter XIVB of the Income tax Act, 1961, an assessment of an undisclosed income can be made only in respect whereof an evidence has been found as a result of search and such other material or information as are available with the A.O. but such material or information must be relatable to such evidence as has been found as a result of search. In support of this contention, reliance was placed on the following judicial pronouncements:

14. It was further submitted that under the provisions of Chapter XIVB of the Income tax Act, 1961, an assessment of an undisclosed income can be made only in respect of an undisclosed income as per the evidence found as a result of search or other material or information relatable to such evidence found in the course of search but the same cannot be invoked to assess an income or reassess where there is escapement. In support of this contention, reliance was placed on the following judicial pronouncements:

(a) L R Gupta and Others Vs Union of India 194 ITR 32

(b) 250 ITR 141 (Del.) CIT Vs Ravi Kant Jain

(c) 248 ITR 310 (Bombay) CIT Vs Shambhulal C Bachkaniwala

(d) 256 ITR 129 CIT Vs Vikram A Doshi, Ms. Leena V Doshi

(e) 248 ITR 562 (Cal.) Bhagwati Prasad Kedia Vs CIT

(f) 293 ITR 643 (Cal.) Caltradeco Steel Oil Pvt. Ltd. Vs CIT

(g) 234 ITR 733 (Guj.) N R Paper & Board Ltd. Vs CIT

(h) 236 ITR 73 (Guj.) Khadubhai Vasan desai

(i) 248 ITR 526 (Guj.) N R Paper & Board Ltd. Vs CIT

(j) 245 ITR 488 (Guj.) CIT Vs Tabulal

15. It was submitted that even if it is held that the block assessment was validly made, various additions made by the A.O. are required to be deleted because there is no evidence found in the course of search which can lead to an assessment of undisclosed income in the block assessment because even the money lying into FDRs and bank accounts with PNB, Noroji Nagar, New Delhi also were declared by the assessee in his statement recorded on 14.03.1996 by ADI Unit 1, New Delhi in which it was stated that the amounts deposited in the bank account with PNB belong to JMM party and source in the hands of JMM is donation received by JMM party. It is submitted that copy of statement dated 14.03.1996 is available on pages 72-77 of the paper book-II filed by the assessee and hence, even the deposits into these bank accounts are also not a new evidence found in the course of search because such deposits were also duly disclosed before the department in their statements recorded on 14.03.1996. and hence, the deposits in those bank accounts is also not a discovery of search and hence, even in respect of deposits in those bank accounts with PNB,Noroji Nagar, New Delhi which were subjected to search, no addition can be made in the block assessment because these bank accounts and deposits therein are not a discovery of search.

16. The counsel of Mr. Simon Marandi did not raise any new argument and he simply submitted that the arguments raised in the case of Shri Shibu Soren may be considered in his case also. Ld. Counsel for the assessee Shri Suraj Mandal also submitted that the arguments raised in the case of Shri Shibu Soren are to be considered in his case also. One new contention was raised by him that the finding of facts as recorded by the A.O. no longer stand because the issue has been adjudicated on the same factual matrix by the Hon’ble Apex Court in criminal appeal NO.1207 and 10208 of 1997 in P V Narsimha Rao Vs State (CBI) regarding the same bank deposits. It was alleged that these four MPs i.e. Shri Shibu Soren, Shri Suraj Mandal, Shri Simon Marandi and Shri Shailendra Mahto belonging to JMM party had received consideration from Congress party for voting against No Confidence Motion against P V Narsimha Rao Government. It is also submitted that the cases lodged by CBI against these MPs under the Prevention of Corruption Act was found unjustified and wrong. It is further submitted that it is also known fact that different parties many a time come closure, form alliance, agree to cooperate with each other in and outside the parliament. It is further submitted that JMM party and Congress party have agreed to cooperate each other. He further submitted that at this juncture of history of the country, the congress party approached the JMM party to help in national interest and not to vote against the P V Narsimha Rao Government in the parliament. He further submitted that JMM party rightly thought that voting out congress party at that critical juncture when the country was facing economic and public unrest in Punjab, J&K and North East etc. can be disastrous for the country and in the national interest, and for stability, national security and economic reforms, the JMM party agreed to help the Congress party. He submitted that congress party suo moto and voluntary donated the amount to JMM party for the cause espoused by the party and for the welfare of the people of Jharkhand. This amount was deposited in the bank accounts in the name of executives functioning for JMM party for the reason that the party can function in that area through its office bearers. It was also submitted that these facts were not stated earlier because of the fear of CBI and for fear of blackmailing and lack of proper understanding the law. It was also submitted that the amount donated by the Congress Party to JMM party cannot at all be treated a bribe to the assessee MPs. It is also submitted that it is wrong to suspect or allege that there was any conspiracy of voting for bribe. He submitted a copy of the judgment of Hon’ble Apex Court in the case of P V Narsimha Rao Vs State (supra). He submitted that there is nothing illegal in a big political party giving donation to a small party. He submitted that voluntary donation of Congress Party to JMM party was not against the objects of the party. He submitted that the amount received by JMM from Congress was donation which is exempted u/s 13A of the Income tax Act, 1961. It is also submitted that the fact that the amount was paid by the Congress party is fully noted by CBI and as per the observation and finding of the A.O. He submitted that the amount was donated by Congress party and it is exempt u/s 13A of the Income tax Act, 1961 and he submitted that this is an alternative submission in the light of facts and circumstances of the case and provisions of law.

17. The counsels of the remaining individual i.e. Shailendra Mahto also submitted that his case may also be decided on the basis of the arguments raised in the case of Shri Shibu Soren.

18. In reply, it was submitted by the Standing counsel for the revenue Smt. Rashmi Chopra that as per the decision of Honourable Delhi court rendered in the case of M B Lal Vs CIT as reported in 279 ITR 298, validity of search cannot be assailed in the appellate proceedings and proper recourse would be to impugn the same in a writ petition which has not been done by the assessee in the present case.

19. Regarding the 2nd contention that search was never conducted on the assessee, it is submitted that in the facts of the case, it is clearly recorded in the Satisfaction note that there are reasons to believe the existence of undisclosed income in the hands of these assesses and other incriminating circumstances/non explanation, which justifies the action for initiation of search of these assesses. She submitted that copy of this satisfaction note along with copy of warrant of authorisation and copy of search manual is already submitted. It is further submitted by her that bank is the place where the undisclosed income of the assessee (undisclosed cash) was kept and thus, as per the provisions of Section 132(1) read with Section 158BC/158BD of the Income tax Act, 1961, search is to be conducted in the place where there is reason to believe that such undisclosed income is lying. She further submitted that the warrant of authorisation clearly provides that the place to be searched is where the undisclosed income is lying. She further submitted that search is “assessee based” and “premises based”. When the authorisation are in the name of the assesses, the search of account/FDRs of the assesses in the bank accounts of the assessee is a search on the assessee. The orders u/s 132(3) were issued both on the bank as well as the assessee. She placed reliance on the tribunal decision rendered in the case of CIT Vs Shilpi Securities in I.T.A. No. 130/Del/2009 dated 30.11.2009, copy of which was submitted by her. Regarding the contention raised by the Ld. Counsel for the assessee that the relationship of the bank and the assessee is that of debtor and creditor by placing reliance on the judgment rendered in the case of K.C.C. Software Ltd. And others as reported in 298 ITR 01, it is submitted that this contention is misconceived because admittedly, the money belongs to the assesses whose source has to be explained by the assessee and the basis of relationship as alleged does not vitiate the assumption of jurisdiction of search. She further submitted that admittedly, the money lying in the bank accounts of the assesses is presumed to be the money of the assessee’s u/s 132(4A) of the Income tax Act, 1961 and in that case reported in 298 ITR 01, the issue involved was regarding withdrawal of money by the income tax Department and not with regard to the question of the premises to be searched and/ or the assessee to be searched. Regarding the argument of Ld. counsel for the assessee in relation to violation of principles of natural justice, i.e. no adequate hearing, it was submitted by her that the assessee did not file any details and only sought adjournments up to 22.04.1997 whereas the assessment was to be completed on or before 30.04.1997. She further submitted that on 02.04.1997, despite seeking number of adjournments earlier, authorised C.A. withdrawn and the assessee does not appear. She further submitted that in the absence of details, the A.O. issued notice u/s 144 for best judgement assessment as the time was running out. She further submitted that the assesses’ A.R. appeared on the date fixed in the notice issued by the A.O. u/s 144 i.e. on 10.04.1997 but still did not file any detail and sought adjournment knowing fully well that the time limit for completing the assessment is to expire on 30.04.1997. She submitted that under these facts, there is no denial of adequate opportunity to the assessee but in fact, the boot is on the other leg as the assessee refused to file details despite a number of adjournments / accommodation by the A.O.

20. Regarding this contention that no notice u/s 143(2) of the Income tax Act, 1961 was issued after filing the return, it was submitted that detailed questionnaire and notice u/s 142(1) and 143(2) of the Income tax Act, 1961 were issued to the assessee on 11.02.1997 asking exhaustive information and the same was replied by the assessee. She submitted a copy of these notices and questionnaire along with reply of the assessee. She submitted that the return was filed on 20.03.1997 and the assesses’ AR continued to appear before the A.O. and non appearing or withdrawal of attorney by C.A. on 02.04.1997 compelled the A.O. to issue notice u/s 144 of the Income tax Act, 1961 which is detailed and exhaustive. She submitted a copy of this notice also. She further submitted that the proceedings for the best judgment assessment was never continued as assessee subsequently appeared and the A.O. allowed the assessee fair and reasonable opportunity to defend himself. She also submitted that the notice issued by the A.O. u/s 144 may be presumed to be notice u/s 143(2) of the Income tax Act, 1961 because ITNS is having no standard prescribed format and the purpose is to inform the assessee regarding the date and information required.

21. Regarding the judgment of the Hon’ble Apex Court in the case of Blue Moon (supra), it is submitted by her that the facts are distinguishable because in that case, notice u/s 143(2) of the Income tax Act, 1961 was never issued and neither any notice u/s 144 was issued in that case whereas in the present case, notice u/s 143(2) was issued before the filling of return and notice u/s 144 was issued after the filing of return and hence, this judgment is not applicable in the present case. It was also submitted that order sheet entries on 26.03.1997 may also be considered as notice to the assessee u/s 143 (2).

22. Regarding this argument that there is no panchnama, it was submitted hat panchnama is not mandatory or expressly stated in the Act. It is a document which is prepared in the presence of panchas containing items found or seized in the course of search as the document/ evidence of seizure. It was also submitted that prohibitory orders u/s 132(3) of the Income tax Act, 1961 as in the present case, does not amount to seizure as it was not practicable to seize the money. She also submitted that the search is concluded when prohibitory order is lifted and books of account/ valuable articles are actually seized and panchnama is prepared. She also submitted that panchnma in any case is relevant only for the purpose of exclusion of period of limitation and in the absence of any seizure, it has no significance and definitely does not vitiate the search. Reliance was placed on the tribunal judgement rendered in the case of Promain Ltd. Vs DCIT as reported in 95 ITD 489 (Del.) (Special Bench). Reliance was also placed on the judgement of Honourable Bombay High Court rendered in the case of CIT Vs Sandhya P Nayak as reported in 253 ITR 534.

23. Regarding this contention that since it was held by the Hon’ble Apex Court in the criminal case with regard to these deposits in the bank that immunity is available to these persons, it was submitted by her that Article 105 of the Constitution or any other Article or Section of Income tax Act, 1961 does not grant immunity to the assessee against the true and complete disclosure of income chargeable to tax and the non taxability of the undisclosed income.

24. Regarding this contention that the income as already disclosed u/s 131 on 14.03.1996 and hence there is no undisclosed income, it was submitted by her that statement made u/s 131 of the Income tax Act, 1961 during pre search inquiry which resulted in issuance of search warrant cannot be deemed to be true and full disclosure of undisclosed income and the same in any case is not true and full disclosure. She submitted that as per Section 158B(b), undisclosed income is gold, bullion, money etc, or income which has not been or would have not been disclosed for the purpose of this act. She submitted that admittedly, no return has ever been filed by these assesses and thus, there is no question of anything was lying disclosed in the present cases. She submitted that mere statement as a part of pre search inquiry cannot amount to disclosure of income possessed by the assessee chargeable to tax. She submitted that the main issue is whether such income was ever disclosed by the assessee at any stage.

25. Regarding this allegation that opportunity for cross examination was not provided, it is submitted by her that the assessee prayed for cross examination of Sushil Kumar introductor of account, but did not turn up to avail the opportunity to cross examine and hence, this allegation is false. It is also submitted by her that even if it is held that cross examination was not allowed, then it does not vitiate the assessment order and at the best it is a matter of remand.

26. Regarding this submission that material/evidence was not found in the course of search, it is submitted by her that undisclosed income is defined u/s 158B(b) while the computation is as per Section 158BB of the Income tax Act, 1961 applicable for search cases w.e.f. 1.7.1995. She submitted that as per the provisions of Section 158 BB, computation of undisclosed income can be on the basis of evidence found as a result of search or by requisition of books of accounts or documents or such other material or information as are available with the A.O. She submitted that information/ statement/ document/ material available with the A.O. can be the basis to compute an undisclosed income.

27. Regarding merits of various additions, she submitted that the A.O. has indicated that the assessee has not been able to rebut the presumption u/s 132(4A) of the Income tax Act, 1961 in view of the discrepancies and infirmity as mentioned in the assessment order and hence, all the additions made by the A.O. should be upheld.

28. In the rejoinder, Ld. ARs of the assessee reiterated the same arguments which were raised by them earlier.

29. We have considered the rival submissions, perused the material on record and have gone through the judgments cited by both the sides. As per the provisions of section 158BA(2) and its Explanation, the Block assessment under chapter XIV – B is in addition to the regular assessment and if any addition is made in such regular assessment or is required to be or is eligible to be made in the regular assessment then such income cannot be added in the Block assessment. This is by now, a settled position of law that in the case of block assessment proceedings, addition can be made on the basis of evidence found as a result of search or requisition of books of accounts or other material and such other material or information which are available with the A.O. and are relatable to such evidence found as a result of search. This is also a settled position by now that for the purpose of addition in the block assessment under chapter XIV B, which will result into levy of higher rate of tax of 60%, incriminating material found in course of search is to be considered and not each and every thing found in course of search. For example, regular books of account maintained by a businessman are also found in course of search but those books are not considered to be incriminating material because existence of regular books is in the knowledge of the revenue although its contents are not known to the revenue. But still, in relation to entries in those books, no addition is to be made in block assessment and addition, if any, is to be made in regular assessment only. This is also a settled position that whether regular assessment is actually made or not or whether any addition in regular assessment is actually made or not is also not relevant and if any addition is required to be made in regular assessment, it cannot be added in block assessment only for this reason that no regular assessment was made or that no addition was made in such regular assessment. In the present case, neither any return of income was filed by the assessee u/s 139 nor any notice was issued by the concerned A.O. u/s 142 (1) or u/s 148 asking the assessee to file a return of income and only notice issued was u/s 158BC. In the backdrop of this legal and factual position, now we examine the other facts of the present case.

30. In the present case, the search was conducted only on various bank accounts of these assesses with PNB, Noroji Nagar, New Delhi, and details of such FDR and saving bank accounts which were subjected to search are noted by the A.O. on page 7 of the assessment order in the case of Shri Shibu Soren. This table has been reproduced by us in Para 2 above. Hence, in our considered opinion, all other additions made by the A.O. in the block assessment of these four persons are liable to be deleted for this reason alone that these are not based on evidence found as a result of search and there is no requisition of books of accounts and other documents in the present case. All these other additions are made on the basis of material and information available with the A.O. as per post search enquiry but these other material and information are not shown to be relatable to any alleged evidence found in the course of search and hence, all other additions made by the A.O. in these block assessment orders are not sustainable. We are taking this view by respectfully following various judgments of Hon’ble High Court of Delhi cited by Ld. A.R. as has been noted by us in Para 14 above. For the sake of ready reference, we note down the relevant findings of some of these judgments which are as under:

(i) In the case of CIT Vs Vishal Aggarwal (supra), a search was conducted u/s 132 of the Income tax Act, 1961 in Feb 1997 but no incriminating material was discovered during the search but the A.O. resorted to Section 158BC of the Income tax Act, 1961 and treated various gifts received by the assessee in assessment year 1993- 94 as concealed income. Under these facts, it was held by the Ld. CIT(A) in that case that it is important that some material document or information should have been discovered during the search operation which would indicate that the gifts were bogus or represent the concealed income of the assessee and since no such material/ document/ information was found, post search inquiry conducted by the A.O. during the block assessment proceedings could not form basis for making addition and since the post search inquiry was unconnected with the information/material recovered during the search, it was held that the A.O. could reopen the assessment u/s 147 of the Income tax Act, 1961 but could not add the income u/s 158BC of the Income tax Act, 1961. On further appeal, the Tribunal upheld the order of the Ld. CIT(A) on this basis that there was nothing in the assessment order to show that any evidence was found during the search to suggest that gifts were bogus. Against this order of the Tribunal in that case, the revenue preferred an appeal before the Hon’ble High Court of Delhi and under these facts, it was held by the Hon’ble High Court of Delhi that since no incriminating material was found in the course of search, the A.O. could not take resort to the provisions of Chapter XIVB of the Act to tax what was said to be undisclosed or concealed income of the assessee.

(ii) Similarly, in the case of CIT Vs G.K.Senniappan (supra), it was held by the Hon’ble High Court of Madras that the provisions of Section 158BB clearly indicate that the words “such other material or information as are available with the A.O.” cannot be bisected or taken in isolation for the purpose of computation. Such other materials or information as are available with the A.O. should as per the section, be relatable to ‘such evidence’, and regarding such evidence, it was held that such evidence means an evidence found as a result of search and if the material or information available with the A.O. is not relatable with an evidence found as a result of search, no addition can be made in the block assessment on the basis of such material or information which is not relatable to any evidence found as a result of search.

(iii) Similarly, in the case of CIT Vs Jupiter Builders (Supra) also, it was held by the Hon’ble High Court of Delhi that if no incriminating material was found during the search, addition in block assessment is not valid.

31. In the present case, only alleged material found in course of search is the money deposited in various saving accounts and FDRs and it is not even an allegation that anything else was found in course of search, in addition to various bank accounts including FDRs with PNB, Noroji Nagar, New Delhi, and other additions made by the A.O. is not on the basis of any material found in course of search or information with the A.O. which is relatable to such alleged evidence found in the course of search and hence, by respectfully following these judgments, we hold that all other additions made by the A.O. are not sustainable since the same are not on the basis of or relatable to any evidence found in the course of search.

32. Now, regarding the addition made by the A.O. with reference to the deposits in various bank accounts and FDRs with PNB, Noroji Nagar, New Delhi, there are two relevant aspects. One aspect is this that whether the money deposited in the bank is income of the assessee and the second aspect is this that even if it is accepted that the money deposited in these bank accounts and FDRs is income of the assessee, whether such income can be added in the block assessment. Regarding the first aspect, this is the explanation given by the Ld. A.R. on merits of this addition that the amounts deposited in these bank accounts is the money of the party i.e. Jharkhand Mukti Morcha (JMM) and not of the assessee and hence, no addition is called for on account of these deposits in PNB, Noroji Nagar, New Delhi also. Before deciding this aspect, we feel that second aspect is needed to be decided first and the first aspect will be required to be decided only if it is found that addition can be made in the block assessment in respect of these deposits in the bank even if it is accepted that it is an income of the assessee. Hence, we proceed to decide the second aspect first and for doing so, we assume that the money deposited in the Noroji Nagar branch of PNB represents income of the assessee.

33. Regarding this aspect that no addition can be made in block assessment with respect to various deposits in Noroji Nagar branch of PNB even if it is an income of the assessee, we first take note of facts of the present case, which are relevant for deciding this aspect. It was submitted by the learned AR of the assessee that these bank accounts were duly disclosed by these assesses in the statements recorded by ADI (Investigation) u/s 131 of the Income tax Act, 1961 on 14.03.1996 and on other dates of March, 1996. It is submitted that a copy of these statements given by these four persons is available on record and an English version of these statements is also furnished in the paper book. It is submitted that in reply to Question No.3, it was stated by Shri Shibu Soren that he has two bank accounts out of which one is in PNB Noroji Nagar, New Delhi and other is in State Bank of India, Sansad Bhavan, New Delhi. It was also stated by him that his wife has no bank account and he does not know of any bank account of his younger son. The other question was as to whether he can explain the source of these bank accounts, FDRs and investment in the car and in reply, it was submitted that FDR of Rs.30 lacs in his name and other FDR of Rs.30 lacs in the name of himself and three MPs are out of the funds of JMM party. It was also submitted that similar statement was recorded of Shri Simon Marandi also by the ADI (Investigation) on the same date i.e. 14.03.1996 and he also stated in reply to Question No.10 that he has one bank account in his name with PNB, Noroji Nagar Branch. It was also stated that he does not remember the account number and there is one more account in the same branch of PNB which is in the joint names of himself, Shri Shibu Soren, MP, Shri Suraj Mandal MP, and Shri Shailendra Mahto MP and it was also submitted that copies of bank statement of both these bank accounts will be supplied within one month and if there is any other bank account in addition to these two bank accounts, he will send the copy of such bank accounts also. When this question was raised, as to what are the details of FDRs with PNB, Noroji Nagar, New Delhi as per Question No.11, it was submitted in reply that complete details will be provided within one month. One more question was raised that as per the information of the department, he has deposited on 01.08.1993, Rs.12 lacs and Rs.21 lacs with PNB, Noroji Nagar, New Delhi, in FDR and there is deposit of Rs. 10,000/- in a joint saving bank account No.18914 in the joint name of Shri Shibu Soren, Shri Simon Marandi and Shri Shailendra Mahto and there is one FDR NO.195, of Rs.30 lacs in the joint name of these four persons. In reply, it was submitted that these are the money of JMM party which are lying in the joint saving bank account and joint FDRs in the name of four MPs and also the FD in his personal name.

34. When this query was raised as to why the amount in question was not deposited in the bank account in the account of the party JMM, it was submitted in reply that it was done as per the decision of the party which was taken prior to 01.08.1993. This query was also raised as to from where the money came with the party and in reply, it was submitted that they are running agitation for separate Jharkhand state and for this purpose, they are getting donation in this respect and as per the decision of the party, the money was deposited in their personal accounts. This query was also raised as to whether they have names and addresses of the persons who have given the donation to the party and in reply, it was submitted that there are coupons and receipts and they have the names of MLAs, MPs etc. who collected these donations from the general public but they do not have individual names of the public.

35. Statement of Shri Shailendra Mahto was also recorded by ADI (Investigation) u/s 131 on 18.03.1996. In that statement, in reply to question No.3, it was submitted by Shri Shailendra Mahto that there is one bank account with State Bank of India, Parliament Annexe, New Delhi which is in his name and it was opened in the year 1990 when he was elected as MP. It was also submitted that there is one saving bank account No.18983 with PNB, Noroji Nagar, New Delhi and this is in his name and was opened on 27.08.1993. It was also submitted that he has asked for statement from the bank and he can give the details after going through the bank statement. When query was raised regarding FDRs with the bank, it was submitted that there is one FDR at PNB, Noroji Nagar, New Delhi and the FDR No. is 196 dated 01.08.1993 and it was also submitted that an amount of Rs.39.80 lacs was deposited in the FDR and subsequently on 8.10.1993, an amount of Rs.20 lacs was transferred from this FDR account to saving bank account No.18983. When he was asked regarding source of the deposits of Rs.39.80 lacs in the FDR, it was replied that this money is belonging to the party JMM and the same was collected by the party as donation in various public meetings and since he was General Secretary of the party, this amount was deposited in his name in the bank.

36. Similarly, statement of Shri Suraj Mandal was also recorded by ADI (Investigation), New Delhi u/s 131 on 14.03.1996. Question No.4 was regarding details of bank accounts of himself and his family members. In reply, he has narrated full details of various bank accounts which include even account with State Bank of India, Karmatand which is in his name and there is one account with State Bank of India at Patna, Vidhan Sabha Branch in which his salary as MLA was being deposited. It was also submitted that there is one account in State Bank of India, Godda Branch and it was also submitted that there is one account with State Bank of India, Sansad Bhavan branch where his salary as MP was being deposited. It was also submitted that there is one saving bank account in his name with PNB, Noroji Nagar, New Delhi in which the money lying was of JMM party. It was also submitted that there is joint saving bank account with PNB Noroji Nagar, New Delhi which is in joint name of four JMM MPs. It was also submitted that there is one FDR in his and in the name of his wife at SBI Karmatand and 2nd FDR with PNB in the joint name of himself and other three JMM MPs. When the question was raised regarding balance in various bank accounts, it was stated by him regarding SBI Karmatand, SBI Vidhan Sabha B ranch and SBI Godda and SBI Sansad Bhavan. Regarding PNB, Noroji Nagar, New Delhi, it was submitted that in that account, Rs.46 lacs was deposited in the year 1993 which may be around Rs.52 lacs on the date of statement after including interest and this money is belonging to the party i.e. JMM party. It was also stated that there is one joint account with the same branch of PNB in the joint name of 4 MPs and Rs. 10,000/- was deposited in the bank account in the beginning.

37. From the above narration of these four statements recorded by ADI(Investigation) in March, 1996, i.e. prior to the date of search, it is clear that all these four MPs have clearly brought out relevant facts and they have duly disclosed the fact of various bank accounts with PNB, Noroji Nagar, New Delhi and from some of the statements, it is also coming out that even before the statements were recorded, concrete information was available with the department regarding the existence of these bank accounts, amounts and money deposited in these bank accounts along with relevant dates of such deposits because in some of the question itself, details of the bank account along with date and amount of money deposited etc. were stated and query was raised for its source etc. and these facts show that full details were available with the department.

38. In the light of these facts, now we have to decide as to whether it can be said that these bank accounts were incriminating material found in course of search when the department was having detailed, concrete and specific information including name of bank, name of branch, account nos., names of account holders, nature of account i.e. saving/FD, date and amount of deposits etc. As per the above discussion, it is noted that the department was already having complete details regarding these bank accounts and deposits in them along with interest credits in those bank accounts and these assesses also have given full details when query was raised in the course of statements recorded u/s 131 in the month of March, 1996 which is prior to the date of search because the search was conducted on these bank accounts on 26.04.1996. Hence, we have to decide as to whether it can be said that facts regarding money lying in deposits in these bank accounts is an incriminating material found as a result of search particularly when the department was knowing beforehand regarding existence of these bank accounts and the details regarding deposits of various amounts on various dates in these bank accounts and such existence of bank accounts and the amounts lying deposited in these bank accounts was also accepted by these four persons in the course of statement recorded by ADIT u/s 131 in the month of March 1996 i.e. prior to the date of search. The case will be different if the department has some vague information regarding existence of some undisclosed asset lying somewhere. But the case is different when concrete and detailed information is available with the department such as name of bank account holder, name of the bank and its branch, account number, amount of deposits and date of deposits etc. In the present case, complete details including the name of the persons in whose names the money was deposited, name of the bank with its branch details, account number, date and amount of deposits etc. was very much available with the department prior to the date of search and even after search, there was no seizure also and merely a prohibitory order u/s 132(3) was placed. Under these facts, in our considered opinion, this is not an incriminating material found as a result of search because complete details were already available with the department even prior to the date of search.

For the purpose of ready reference, we would like to reproduce the provisions of the relevant Section of Chapter XIVB, i.e. Section 158B(b) and 158BB(1):

(b) “undisclosed income” includes any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions, where such money, bullion, jewellery, valuable article, thing, entry in the books of account or other document or transaction represents wholly or partly income or property which has not been or would not have been disclosed for the purposes of this Act 53[,or any expense, deduction or allowance claimed under this Act which is found to be false].

Section 158BB(1): Computation of undisclosed income of the block period.

The undisclosed income of the block period shall be the aggregate of the total income of the previous years falling within the block period computed, ^[m accordance with the provisions of this Act, on the basis of evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence], as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years, determined,—

(a) where assessments under section 143 or section 144 or section 147 have been concluded prior to the date of commencement of the search or the date of requisition], on the basis of such assessments;

(b) where returns of income have been filed under section 139 -“[or in response to a notice issued under sub-section (I) of section 142 or section 148] but assessments have not been made till the date of search or requisition, on the basis of the income disclosed in such returns;

(c) where the due date for filing a return of income has expired, but no return of income has been filed,—

(A) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such entries result in computation of loss for any previous year falling in the block period: or

(B) on the basis of entries as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition where such income does not exceed the maximum amount not chargeable to tax for any previous year falling in the block period;

(ca) where the due date for filing a return of income has expired, but no return of income has been filed, as nil in cases not falling under clause (c-);]

(d) where the previous year has not ended or the date of filing the return of income under sub-section (1) of section 139 has not expired, on the basis of entries relating to such income or transactions as recorded in the books of account and other documents maintained in the normal course on or before the date of the search or requisition relating to such previous years;

(e) where any order of settlement has been made under sub-section (4) of section 245D, on the basis of such order; {/) where an assessment of undisclosed income had been made earlier under clause (c) of section 158BC, on the basis of such assessment.

Explanation.—For the purposes of determination of undisclosed income,—

(a) the total income or loss of each previous year shall, for the purpose of aggregation, be taken as the total income or loss computed in accordance with the provisions of ?“[this Act] without giving effect to set off of brought forward losses under Chapter VI or un absorbed depreciation under subsection (2) of section 32:

‘”[Provided that in computing deductions under Chapter VI-A for the purposes of the said aggregation, effect shall be given to set off of brought forward losses under Chapter VI or un absorbed depreciation under sub-section (2) of section 32;J

][(b)of a firm, returned income and total income assessed for each of the previous years falling within the block period shall be the income determined before allowing deduction of salary, interest, commission, bonus or remuneration by whatever name called S2[to any partner not being a working partner]:

Provided that undisclosed income of the firm so determined shall not be chargeable to tax in the hands of the partners, whether on allocation or on account of enhancement;]

(f) assessment under section 143 includes determination of income under sub­section (1) or sub-section (IB) of section 143.

(2) In computing the undisclosed income of the block period, the provisions of sections 68,69,69A, 69B and 69C shall, so far as may be, apply and references to “financial year” in those sections shall be construed as references to the relevant previous year falling in the block period including the previous year ending with the date of search or of the requisition.

(3) The burden of proving to the satisfaction of the Assessing Officer that any undisclosed income had already been disclosed in any return of income filed by the assessee before the commencement of search or of the requisition, as the case may be, shall be on the assessee.

(4) For the purpose of assessment under this Chapter, losses brought forward from the previous year under Chapter VI or un absorbed depreciation under sub­section (2) of section 32 shall not be set oil against the undisclosed income determined in the block assessment under this Chapter, but may be carried forward for being set off in the regular assessments.”

39. From the above provisions of clause (b) of Section 158B, it is seen that undisclosed income includes any money, bullion, jewellery and other valuable article or thing and any income based on any entry in the books of accounts or other document or transaction where such money, bullion, jewellery etc. represent wholly or partly income of the property which has not been and would not have been disclosed for the purpose of this Act. Now, we analyze the facts of the present case in the light of these provisions of Section 158B(b) of the Act. In the present case, we find that money lying in various bank accounts was already in the knowledge of the department with complete details and when the department confronted the assesses, in the statements recorded u/s 131 in the month of March 1996, all these persons have duly accepted and given details of these deposits in these bank accounts including the date and amount of deposits and hence, the question is whether these bank accounts can be said to comply with the requirement of the provisions of Section 158B(b) that this would not have been disclosed for the purpose of this Act. In addition to this, as per the provisions of Section 158BB, an addition in the block assessment can be made only on the basis of evidence found as a result of search. It is by now a settled position of law that only that evidence found as a result of search will be relevant for making any addition in the block assessment which is considered an incriminating material because the regular books may also be found in course of search but the entries in regular books cannot be considered in block assessment. The reason is this that the existence of regular books is in the knowledge of the department.

40. In the present case, there is no requisition of books of accounts and hence, the only basis on which any addition can be made in the block assessment with respect to these bank accounts can be that it is on the basis of incriminating material found as a result of search. We have already seen that the existence of these bank accounts along with complete details regarding the names of account holders, name of the bank and its branch along with date and amount of deposits etc. were known to the department before hand and hence, it cannot be said that this is an incriminating material found as a result of search.

41. In the light of these facts and above noted legal provisions, now, we examine the applicability of the judgment relied upon by the learned AR of the assessee being the judgment of Hon’ble High Court of Delhi rendered in the case of L R Gupta and Others Vs Union of India and others (Supra). Although this judgment is with regard to validity of search itself and in the present case, we are not deciding this question as to whether the search in the present case is valid search or not because before us neither there is an objection raised by the assessee regarding validity of search nor this Tribunal is competent to decide the issue regarding validity of search but various observations of Hon’ble Delhi High Court in that case will be useful and relevant for the purpose of deciding this aspect of the mater as to whether in the facts of the present case, it can be said that these bank accounts are incriminating evidences found as a result of search. In our considered opinion, following Para of page 47-48 of 194 ITR is relevant in the present case and hence, the same is reproduced as under:

“(c) refers to money, bullion or jewellery or other valuable articles which, either wholly or partly, should have been the income of an assessee which has not been disclosed for the purpose of the Act. The said sub-clause pertains only to movable and not immovable assets. Secondly, it pertains to those assets which, wholly or partly, represent what should have been his income. The expression income “which has not been, or would not be, disclosed for the purposes of the Income-tax Act” would mean, that income which is liable to tax but which the assessee has not returned in his income-tax return or made known to the Income-tax Department. The sub-clause itself refers to this as “undisclosed income or property”. In our opinion, the words “undisclosed”, in that context, must mean income which is hidden from the Department. Clause (c) would refer to cases where the assessee knows that the movable asset is income or represents income which is taxable but which asset is not disclosed to the Department for the purpose of taxation. Those assets must be or represent hidden or secreted funds or assets. Where, however, the existence of the money or asset is known to the Income-tax Department and where the case of the assessee is that the said money or valuable asset is not liable to be taxed, then, in our opinion, the provisions of sub-clause (c) of section 132(1) would not be attracted. An assessee is under no obligation to disclose in his return of income all the moneys which are received by him which do not partake of the character of income or income liable to fax. If an assessee receives, admittedly, a gift from a relation or earns agricultural income which is not subject to tax, then he would not be liable to show receipt of that money in his income-tax return, Non­disclosure of the same would not attract the provisions of section 132(1)(c). It may be that the opinion of the assessee that the receipt of such amount is not taxable may be incorrect and, in law, the same may be taxable but where the department is aware of the existence of such an asset or the receipt of such an income by the assessee, then the Department may be fully justified in issuing a notice under section 148 of the Act, but no action can be taken under section 132(l)(c). An authorization under section 132(1) can be issued if there is a reasonable belief that the assessee does not want the Income-tax Department to know about the existence of such income or asset in an effort to escape assessment. Section 132(l)(c) has been incorporated in order to enable the Department to take physical possession of those movable properties or articles which are or represent undisclosed income or property. The words “undisclosed income” must mean- income which is liable to be taxed under the provisions of the Income-tax Act but which has not been disclosed by an assessee in an effort to escape assessment. “Not disclosed” must mean the intention of-the assessee to hide the existence of the income or the asset from the Income-tax Department while being aware that the same is rightly taxable.”

42. From the above Para of this judgement of Honourable Delhi High Court rendered in the case of L R Gupta (supra), we find that it is observed by the Honourable High Court of Delhi that it may be that in the opinion of the assessee, any receipt of an amount is not taxable and such opinion of the assessee may be incorrect and the same may be taxable but where the department is aware of the existence of such an asset or receipt of such an amount by the assessee then the department may be fully justified in issuing notice u/s 148 of the Income tax Act, 1961 but no action can be taken u/s 132(1)(c). When as per the Hon’ble High Court of Delhi, if the existence of asset is known to the department, the department may be justified to issue notice u/s 148 but search u/s 131 is not justified, then how it can be said that on the basis of a search conducted under these facts, the existence of such asset which was in the knowledge of the department can be said to be an incriminating evidence found in the course of search. Anything found in the course of search ‘which is not already known’ may be considered as incriminating evidence but a known thing cannot be found again suggesting that an incriminating evidence is found as a result of search. This can be understood with the help of an example also. Let us presume that the department knows that a person “B” is having an amount of Rs. 1 lac in his brief case lying with “A”. When a query is raised, that person also accepts that he is having an amount of Rs. 1 lac in his brief case lying with “A” and later on, only that brief case is searched and it is found that his brief case was having an amount of Rs. 1 lac only. Before searching the brief case, it was known to the department that this brief case is belonging to “Mr. B” and the same is containing an amount of Rs. 1 lac and after the action of the search, it has merely confirmed such knowledge of this fact that the brief case of “Mr. B” is having an amount of Rs. 1 lac but this is not an new evidence found in the course of search. In our considered opinion, the search under these facts merely confirmed the knowledge which was available prior to the action of the search and hence, it is not new evidence found in the course of search but it is a confirmation of knowledge about the existence of an asset by way of verification in the course of search. In our considered opinion, there is a difference between evidence found in the course of search and confirmation of concrete information available before the search. The conclusion will be different if the information or knowledge before search is vague. In that case also, the conclusion may be different where there was a concrete information about existence of an asset but the search action is not restricted to the search of that known asset only but the search was carried out for other things also and ultimately after search, only that known asset was found in search or that asset and some other asset was also found in search. But when search is restricted to that item of asset only for which detailed and concrete information was already available, it cannot be said that such asset was found in course of search. At the best, it can be said that the search has confirmed the knowledge about that asset. As per the provisions of Section 158BB, addition can be made in the course of a block assessment on the basis of evidence found in the course of search and not on the basis of confirmation of a prior knowledge by way of search. This can be viewed from a different angle also. It is observed by the Hon’ble High Court of Delhi in the case of LR Gupta (supra) that when the existence of an asset is in the knowledge of the department, department may be fully justified in issuing notice u/s 148 of the Income tax Act, 1961. In the present case also, the existence of bank accounts in the name of these assesses with complete details such as name of the bank, branch, account number as well as date and amount of deposits etc. were known to the department and hence, as per this judgment of Hon’ble High Court of Delhi rendered in the case of L R Gupta (supra), the department could have issued a notice u/s 148 of the Income tax Act, 1961. If this be so then can it be said that under the same facts, an addition can be made on the basis of notice issued to the assessee u/s 148 and also in the case of block assessment under Chapter XIVB which will result into attraction of higher rate of tax @ 60%. This is by now a settled position of law that block assessment is with respect to the undisclosed income, found as per the evidence found in the course of search and regular assessment has to be completed on the basis of regular return of income filed by the assessee as per Section 139 or Section 142(1) or on the basis of notice issued under Section 148 and hence, an income cannot be subject matter of addition in the block assessment as well as in regular assessment. As per the above cited judgment of Hon’ble High Court of Delhi, this can be a subject matter of regular assessment, by way of issuing notice u/s 148 and hence, it is implied that this cannot be a subject matter of block assessment under Chapter XIVB. Whether the department has taken action for regular assessment or not, is not relevant for the purpose of deciding the issue as to whether any addition can be made in the case of block assessment. What is relevant is this that whether the amount in question for which the addition is proposed by the A.O. is based on any evidence found as a result of search or not. In our considered opinion, in the present case, the amount which has been added by the A.O. in respect of deposits in various bank accounts with PNB Noroji Nagar, New Delhi is not on the basis of any evidence found in the course of search and hence, no such addition can be made in the block assessment proceedings. In her written submissions, on this aspect, learned counsel for the revenue has merely submitted that Statements made under section 131 cannot be deemed to be “true and full disclosure of disclosed income” and hence addition can be made in block. Her second contention was this that no return of income was filed by these assesses at any point of time and hence, there is no question of there being anything disclosed. These contentions of her are not valid because this is not the legal position as explained by Hon’ble Delhi High Court in the case of L. R. Gupta (Supra) that if there is any undisclosed income and there is a search, addition of such undisclosed income is to be made in block. It is observed by the Hon’ble Jurisdictional High Court in this case that where the department is aware of the existence of an asset, then the department may be fully justified in issuing notice u/s 148 if the department feels that there is any undisclosed income. This shows that for undisclosed income, addition can be made in reassessment proceedings also if the department is aware about the assets and department does not agree with the explanation of the assessee that receipt out of which the asset has come into existence is not taxable. In the present case also, the department is fully aware with precise and minute details about these bank accounts and money lying therein and the assessee also accepted about these bank accounts in the Statements u/s 131 and also explained that these are party funds. If the department is not satisfied with such explanation of the assessee, it could have been questioned in regular assessments by issuing notice u/s 148 but these bank accounts in the facts and circumstances of the present case cannot be subject matter of consideration and addition in block assessment proceedings. We, therefore, delete the addition on account of these bank accounts also by holding that the same cannot be considered or added in block assessment.

43. In the light of this decision as per which we have held that no addition is justified in the present case, either in respect of deposits in various bank accounts with PNB Noroji Nagar, New Delhi or various other additions made by the A.O., which are not relatable to any evidence found in course of search, we are of the considered opinion that no adjudication is called for regarding various other contentions raised by the Ld. A.R. regarding non existence of search, or non validity of search for the reason that there is no panchnama or that there is no notice issued by the A.O. u/s 143(2) after filing of block return etc. We do not decide these aspects because now these aspects are of academic interest only once it is held by us that no addition made by the A.O. in the present cases is sustainable. We, therefore, do not decide these aspects.

44. In the result, all these four appeals filed by these four individual assesses are allowed in the terms indicated above.

45. Now, we take up the remaining one appeal filed by the JMM party against the block assessment order passed by the A.O. u/s 158BC read u/s 158BD of the Income tax Act, 1961.

46. Regarding this assessee also, various technical arguments were made that no satisfaction was recorded by the A.O. of the searched person etc. but we feel that we are not required to go into these arguments because we find that once it is held in the above four individual cases that no incriminating evidence was found in course of search justifying any addition u/s 158BC in their hands, this protective addition in the case of JMM also goes because when it is held in cases of searched persons that no incriminating evidence was found in course of search, there cannot be an evidence found in course of search justifying any addition in any other case by invoking the provisions of section 158BD because for that also, it has to be shown that some incriminating evidence was found in search which is not relatable to the searched person but to some other person. In the absence of any incriminating material having been found in course of search, there is no basis to make any addition in the hands of any other person also under chapter XIV B. Hence, the additions made in this case are also deleted.

47. In the result, all five appeals are allowed in the terms indicated above. Order pronounced on the open court on 2nd day of September, 2011.